It used to be easier to become a financial adviser than a hairdresser. Before the legislative reforms that shook up the industry in 2012/13, it was as simple as completing a two-day course online and sitting an exam that few, if anyone, failed.

By January 2024, anyone recommending investments or advising people about their financial futures will be required to have completed a bachelor or higher degree or equivalent qualification approved by the Financial Advisor Standards and Ethics Authority.

They will also need to pass a rigorous exam, follow a code of ethics, engage in a professional year of supervised work before advising their first client and submit themselves to continuous professional development courses.

The horrible history of unqualified, commission-driven financial advice has been replaced with a fee-for-service model. There has not only been a ban on conflicted remuneration but, critically, a duty to act in the client's best interests. Corporate regulator ASIC now also makes it simple for consumers to find trusted advisers through an online register.

The contrast between financial advisers and mortgage brokers has never been more striking.

Remarkably, given the intense focus and political debate about dodgy financial advice, brokers can still usher clients in to debt arrangements they can't afford to repay. This has become dangerous with the payment of commissions to those who introduce customers to the banks.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has revealed the extent to which Australians have been let down by this cavalier approach.

On day one of the hearings, Senior Counsel Assisting the Commission Rowena Orr revealed the banks had paid out $250 million to 540,000 mortgage customers since July 2010 due to outright fraud (misrepresenting a client's income, assets etc) and irresponsible lending practices (recommending finance that is unsuitable to the client) or administrative errors. The banks have also paid out almost $90 million in remediation to 17,000 car loan customers.

According to ASIC, 55 per cent of all mortgages are now written with the help of a mortgage broker. Before too long Australia is expected to reach the 60-70 per cent penetration levels now seen in the UK.

An ASIC review of the industry recently revealed that customers who dealt with mortgage brokers typically borrowed more money than those who applied directly with their lenders.

The higher the loan, the higher the commission. On a $500,000 loan, mortgage brokers were paid an average sign-up fee of $2,700 (0.54 per cent) and $700 (0.14 per cent) a year in trailing commissions. ASIC stopped short of recommending a ban on commissions, though it did express alarm about the use of "soft" commissions like overseas holidays and other extravagant gifts provided to encourage brokers to refer customers their way.

Introducer program nets billions

The royal commission heard not only about the problems with mortgage brokers, but also with other professionals who the banks pay to recommend them to their clients.

NAB executive Anthony Waldron assumed the honour of being the commission's first witness. He was there to discuss NAB's "Introducer Program", which rewards accountants, lawyers, real estate agents and even gym owners, among others, for introducing clients to the NAB.

Between 2013 and 2016, the bank generated $24 billion from this facility. It paid these commercial match makers about $100 million in commissions.

Mr Waldron admitted that some of the bank's staff and the "introducers" engaged in fraudulent conduct related to the Introducer Program and loans issued through it. They falsified customer signatures and supplied fraudulent documents with some loan applications. Before the commission had even been established, NAB dismissed 20 bankers due to their abuse of the Introducer Program. Thirty others faced disciplinary action.

Westpac case

The commission has made it clear that it will not fix its gaze on cases already before the courts.

In a three-week trial against Westpac, due to start on September 3, ASIC will allege that between December 2011 and March 2015, the bank failed to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts.

The National Credit Act provides consumer protections to ensure that credit providers make reasonable inquiries about a borrower's financial situation and assess whether a loan contract will be unsuitable for the borrowers.

One of Commissioner Kenneth Hayne's duties will be to establish whether current laws are regulators are fit for purpose.